In B2B markets many products are undifferentiated and not surprisingly potential customers see them as all the same. Business-to-business companies struggle to communicate recognizable benefits that set them apart from competitors. This means that many businesses fall back on the only way they know, they compete on price. The result is a price war.
There is another way. Over the last 15 years B2B International has researched global markets and found out that the average proportion of any B2B market that ranks price over all other factors is just 20%. Price-focused companies are missing a huge opportunity to distinguish their products and services by finding points of value in their offering.
Marketers can drive differentiation by taking a three-step approach:
- Review the full product offering and recognize value over price.
- Define the brand’s position within the market.
- Obtain an in-depth understanding of customer requirements.
Recognize value over price
B2B companies often fail to recognize that they have something in their offer which is of value to companies. Because they are very often manufacturing companies, they focus on the product and the price when in fact service aspects could have a significant value and would be great differentiating features. Differentiating features may exist in the raw material, the processing equipment, the utilization of labor or processing control. An examination of these factors could uncover new customer value propositions.
We shouldn’t forget the importance of quality. Quality is often placed at the top of the priority list in B2B markets, and procurement officials put their reputations on the line with their choice of supplier. To these individuals, quality represents both value for money and job security.
Service is also a highly desirable feature which can be used to differentiate the offer. Focus can be placed on several benefits such as easy access to the sales and technical teams, delivery performance, the speed and efficiency of sales staff, and the timely supply of effective technical help when required.
Define the brands position in the market and make it distinctive
Understanding a brand, particularly its unique selling proposition, is key to developing a differentiating strategy. Amongst B2B companies the value attached to the brand is often significantly underestimated. It is our belief that most B2B buyers truly value the reputation (for this read brand) of their suppliers to the point where most of them stay loyal year in and year out. On this basis we would argue that the brand may well account for 30% to 50% of the buying decision even though someone in procurement may not always admit this.
Invest in comprehensive customer research
Of course, not everybody wants the same things. Some value service, others value quality and others may value the lower cost. It is vital that marketers understand the priorities of potential customers so that they can be segmented and targeted accordingly. By implementing a customer segmentation strategy, the price-focused customers can be separated from those who place a higher value on quality and excellent services, providing businesses with a target audience for the new messaging.
A segmentation strategy requires a good knowledge of customers and potential customers. The marketer’s emphasis can then focus on the audience that value the aspects of the offer which the company can provide and which hopefully can do so better than the competition.
In summary, seeking unique brand and product benefits, together with detailed information on both customers and competitors, is key to differentiating an offering and avoiding competing solely on price. By rethinking the marketing of even the most basic product and creating a strong, differentiated strategy based on added value, it is possible to defend against competitor price cuts and even command a premium price.